Should I Refinance For a Lower Payment?

A Twitter listener asks if it's smart to refinance a house to have a lower mortgage payment. Dave says it's smart to refinance a house when you're looking for a lower interest rate.

QUESTION: A Twitter listener asks if it’s smart to refinance a house to have a lower mortgage payment. Dave says no and that it’s smart to refinance a house when you’re looking for a lower interest rate.

ANSWER: No, it’s smart to refinance a house to have a lower interest rate, thereby paying off the home quicker. Today, on a 15-year fixed rate with one point paid, you can get under a 4% rate. Oh, my goodness, that’s awesome! Some of you sitting there with a 6% rate, if you have a $300,000 mortgage, that saves you 2%. A 2% savings is $6,000 a year. That’s $500 a month in interest saved. That’s worth doing. Refinancing does make a ton of sense in those cases if you’re going to stay in the home and if you’re going to save on the interest rate. Those would be the reasons that you refi. There’s no other real reason to refi.